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HomeLaw & PoliticsCoinbase Warns Traders Involved In Taking Advantage Of Price Glitch

Coinbase Warns Traders Involved In Taking Advantage Of Price Glitch

Coinbase, the second largest cryptocurrency exchange in terms of trading volume, has hinted that the company can file legal action against 1000 customers in the Republic of Georgia to take advantage of a price glitch. The reason for interest is that since the average price of one lari, the local currency of Georgia, surged drastically on the exchange because of a glitch.

On August 29, around one thousand Coinbase customers in a country that straddles both Europe and Asia took advantage of an “arbitrage opportunity” that occurred when the lari, the country’s native currency, was valued at $290 rather than $2.90 on Coinbase for almost six hours. The group accounts for just 0.001% of the total users of the firm situated in the United States.

Coinbase said that the issue arose due to the actions of a “third party,” although they did not specify which entity was to blame. As a result, the event exemplifies a worry that has been held by financial authorities for a very long time: the risks that are presented to institutions by external partnerships.

“When everything is done within a bank, we know exactly who is accountable when things break,” said U.S. Comptroller of the Currency Michael Hsu last week. When work is split between an institution and fintech startups with different business models, however, “that’s when risk can get lost.”

According to a representative for Coinbase, the amount of money the firm lost as an outcome of the incident in Georgia, which the company has refused to disclose.

Coinbase has not confirmed whether or not the exchange attempted to contact Georgian banks in order to request that traders’ accounts be frozen. According to the traders who received the benefits of the glitch, at least two of Georgia’s main financial institutions, namely Bank of Georgia and TBC, froze the accounts of the users who took advantage of the glitch but then unfroze those accounts.

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Reporter
Jeewan Singh is CryptoShrypto’s content writer and a seasoned writer with over two years of experience in writing about Indian Securities Market. Jeewan's participation in Blockchain and Cryptocurrency started in late 2020, and he hasn't looked back since. The technical and economic outcomes of cryptocurrency are what spark his curiosity, and he keeps one eye on the market.
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